Entrepreneurs who have presided over successful businesses tend to possess a multiplicity of talents and capabilities. Some may have scientific aptitudes that take them into specialist markets (such as biotech or engineering), while others may be drawn to more creative pursuits such as video production or music technology. But whatever the business path they’ve chosen to furrow, they all share one characteristic in common: they have a unique ability to convert an idea into a product or service that makes money.
One crucial ability in this is a capacity to spot opportunities when they arise in the market – that ramifying web of interconnected businesses and consumers (and government regulations) that all enterprises have to compete and succeed within. To seize such an opportunity profitably, many businesses, large and small, often discover that they need more capital than they currently have at their disposal – to expand, to meet a perceived demand, and to generate more profit.
This is the point where entrepreneurs often turn to investors, keenly aware that stasis isn’t an option in the business world: evolve and grow or gradually perish are the two tough choices before them. So, how do businesses persuade hard-headed investors that pouring financial resources into their firm will result in a tidy return on investment?
Here are some of the fundamental essentials that all businesses in search of investment must have in place if they’re to secure that goal.
Watertight data
Sound data, properly ordered, provides potential investors with a key ‘persuader’: the data reveals a trail of previous results for the business. Without data to anchor a request for investment, investors simply won’t be swayed by mere talk and ideas. Data shows investors that the entrepreneur before them is someone who gets things done and such evidence of a prior track record is crucial to adding substance to a new idea. They will be more inclined to agree that a business can work at scale if it can demonstrate that it’s already working admirably at a smaller size.
It’s also imperative that a business has everything in order at the ground-level if it truly wants to pique the interest of a potential investor. Ensuring the legalities are adhered to – documents and payroll included – is essential for any business seeking investment. Being able to prove to an investor that the business holds, or has distributed, accurate and legally compliant documents, including a P45 and P60 to each of its employees, could be crucial in creating trust with an interested third-party. Of course, there are several more important factors to take into consideration, but these are some of the fundamentals that will not be overlooked by an investor.
However, for newbie entrepreneurs and startup businesses, a robust business plan can help to make up for a yet-to-be achieved data trail. Let’s consider that next.
A solid business plan
If there isn’t a track record to guide investors, a meticulously assembled business plan demonstrates another real quality that they will consider parting with their cash for: a disciplined, hard-headed mind showing clear thinking through of a proposal to make money. As a general rule, it won’t be sufficient alone to convince investors to pour funds into a business, but a business without one stands zero chance of attracting investment.
Data informs a sound business plan, so to be viable, it must include data that supports an entrepreneur’s targeting of a particular market. Financial projections must be backed with hard numbers in a viable plan, along with data justifying proposed sales channels and analysis of the competition for a planned product or service. It should also include a realistic timeline for returns on the investment and an overview of potential obstacles (as well as proposals for overcoming them).
A vital tip: place all the key data in summary form in an executive summary – investors simply don’t have time to wade through a 60-page plan.
Company talent
Investors are acutely aware that businesses planning to scale will require the talent to guide that process skilfully – not so easy at a time when skills shortages threaten to stifle growth in some sectors. They will want to know about a company’s talent, especially as reflected in its management team – the people who will be executing the business plan and bringing it to fruition. Possessing demonstrable expertise and skill in a firm’s key players will play a significant part in persuading investors to favour a company.
The bottom line
Investors are not charities – they invest in order to make money, and the key task of an applicant is to convince them sufficiently that they will deliver precisely that. In other words, a great deal of serious preparation goes into the making of a successful pitch.
Hard data; a rock-solid, thoroughly researched and data-based business plan; a demonstrably skilled talent team who can show how, when and on what the money will be spent; and, finally, a compelling story to bring it all to life are the indispensable ingredients of a successful bid for investment.
None of the above will guarantee a successful bid for investment, but failures to have any of them firmly in place will almost certainly guarantee a refusal.